RBI to regulate peer-to-peer lending; to issue norms with SEBI

By: | Published: April 5, 2016 1:38 PM

The Reserve Bank of India has decided to step in and regulate the growing peer-to-peer (P2P) lending activity in the country in consultation with the capital market regulator, Securities Exchange Board of India (SEBI) as it feels such lending poses risks to the system.

RBI Governor Raghuram RajanIn the credit policy, RBI Governor, Raghuram Rajan said that the central bank will prepare a Concept Note on P2P lending will be put up on the Reserve Bank’s website for public comments by April 30, 2016. Based on the feedback, the contours of regulating P2P lending will be decided in consultation with SEBI. (Express photo)

Peer-to-Peer lending (P2P) lending has shown accelerated growth over the last one year. The Reserve Bank of India cannot be oblivious to the risks posed by such institutions to the system, the central bank governor Raghuram Rajan said.

The Reserve Bank of India has decided to step in and regulate the growing peer-to-peer (P2P) lending activity in the country in consultation with the capital market regulator, Securities Exchange Board of India (SEBI) as it feels such lending poses risks to the system.

Peer-to-peer lending refers to lending money by individuals and business through online services by matching lenders directly with borrowers.

In the credit policy, RBI Governor, Raghuram Rajan said that the central bank will prepare a Concept Note on P2P lending will be put up on the Reserve Bank’s website for public comments by April 30, 2016. Based on the feedback, the contours of regulating P2P lending will be decided in consultation with SEBI.

“Peer to Peer Lending (P2P) lending has shown accelerated growth over the last one year. While encouraging innovations, the Reserve Bank cannot be oblivious to the risks posed by such institutions to the system,” RBI has said.

Reacting to the announcement, Bhuvan Rustagi, co-founder and COO, Lendbox, one of the leading P2P lenders welcomed the RBI’s move to regulate the market. “We welcome the announcement. It will create a level-playing field with conventional lenders. We need guidance from RBI on underwriting methods.” Rustagi told FeMoney. He said the RBI’s regulations would also increase investor confidence in the sector.

However, he said that P2P platforms are any threat to conventional lenders and the growth of P2P lenders would strengthen the lending.

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